Megatrends Reinventing the Ways Your Patient, Provider and Payer Customers Think. Manatt Health November 14, :00 2:00 PM ET

Transcription

1 1 Megatrends Reinventing the Ways Your Patient, Provider and Payer Customers Think Manatt Health November 14, :00 2:00 PM ET

2 Today s Speakers 2 Sandy Robinson Managing Director Helen Pfister Partner Adam Finkelstein Counsel Annemarie Wouters Senior Advisor

3 Today s Objectives 3 Megatrends for three customer segments Looking ahead insights Q&A with Manatt team

4 Attendee Polling Question Which of the three customer segments are of greatest concern to you in your current role? A. Patients B. Providers C. Payers

5 Landscape Overview 5 The pharmaceutical industry is facing one of the more uncertain political and regulatory environments in recent memory. In the debate over rising drug prices, both drugmakers and PBMs claim innocence Why hospitals are suing CMS over 340B cuts 5

6 Megatrends for Patients 6

7 How Are Threats To Copay Assistance Driving Direct-To-Patient Market Innovation? 7

8 Drug Copayment Assistance Increasingly Threatened 8 California Bill AB 265 California Assembly member Jim Wood introduced legislation in early 2017 that would ban use of copay coupons in CA when a generic equivalent drug covered by the individual s health plan exists. Bill was signed into law by Governor Jerry Brown on Monday, October 9, 2017 Exceptions in the law include HIV and AIDS maintenance drugs, drugs for individuals who have completed required step therapy or other prior authorization requirements Manufacturers can continue to offer products free of cost (to patients and/or insurer); pharmacists can continue to substitute a drug; patients can still obtain assistance through independent charities PhRMA issued a statement following the Governor s signature, stating the law doesn t ensure patients who need branded products over generics will be able to get those drugs California Bill SB 17 On the same day Governor Brown also signed into law SB-17, a piece of legislation forcing drug manufacturers to give warning of and explain increased prices of their products California Legislative Information, AB265:

9 Ongoing Investigations of Patient Assistance Charities Jeopardize Patient Access to Medications 9 Investigations, subpoenas and inquiries are more widespread. Investigations into Patient Assistance Programs IRS is investigating tax-exempt status of patient assistance charity Good Days formerly the Chronic Disease Fund (CDF). Investigation alleges Good Days copay assistance program gave impermissible benefits to its pharmaceutical company donors by returning money donated as payments for drugs they manufacture. If claims prove true, Good Days could lose its taxexempt status. U.S. Attorney s Office for the District of Massachusetts also conducting separate inquiry into patient assistance groups and their relationships with drug industry. Life Science Companies Increasingly Receiving Subpoenas Support of 501(c)(3) organizations that provide financial assistance to patients (2017) Payments to charities that help Medicare patients pay for their drugs (2017) Relationship with the Patient Access Network Foundation (PANF) and other nonprofits that offer financial assistance to Medicare patients (2016,2015) Alleged collusion with PANF and CDF to boost sales of specific product (2016) Funding of co-pay assistance programs (2016) Contributions to patient assistance programs (2015)

10 PBMs Are Entering The Drug Discount Program Space 10 PBMs are developing a more comprehensive menu of consumer-oriented services as a hedge against cost pressures, to create positive press and to leverage their unique role in the supply chain. + + Description Coverage Status Direct-to-consumer savings program for three Novo insulin products [Novolin R, Novolin N and Novolin 70/30 ] where patients forego insurance coverage, if they have it, and pay discounted amount completely out of pocket (cash pay) Uninsured or insured who forego use of insurance (cash-paying) AARP members and families receive discounts on medications [FDA-approved generic, brand name, or specialty drugs] not covered by the patient s current prescription plan or Part D plan Underinsured PBM: Pharmacy Benefit Manager; ExpressScripts/Lilly: CVS/Novo Nordisk: OptumRX/AARP:

11 Continued Consolidation in the Healthcare Industry 11 Potential Outcomes of the Deal Increased options for patients seeking care: o CVS Minute Clinics o Increased focus on population health better outcomes for less cost Savings through more efficient formulary design More leverage in price negotiations CVS recently announced next-day delivery of drugs (same day in NYC)?

12 As Amazon Contemplates Entering the Healthcare Market, A New Frontier Could be Emerging 12 Amazon s primary customer is between 30 and 45 years old Amazon is already competing with in-store pharmacies on over the counter medications Opportunity to establish in-store pharmacies within Whole Foods with prescription fulfillment through mail-order delivery

13 Looking Ahead 13 Pharmaceutical company sponsored patient copayment assistance through copay cards and giving to charitable foundations will continue to be threatened Overlay of state drug pricing transparency legislation (with or without copay bans) adds additional pressure on helping patients in traditional ways Concurrently, emerging entities are signaling direct-to-patient assistance in new ways Pharmaceutical companies will need to seek safe harbors and pilots to continue traditional model of support while designing innovative ways to engage through emerging partners 13

14 Megatrends for Providers 14

15 Attendee Polling Question How does your organization participate in the 340B program? A. Pharmaceutical manufacturer B. Hospital or other 340B covered entity C. Other type of organization or entity D. My organization does not participate in the 340B program

16 What is the Future of the 340B Program? 16

17 340B Program Overview 17 Established in 1992, and enables eligible healthcare providers and programs ( covered entities ) to purchase outpatient drugs for their patients at discounted prices. Covered Entities Eligible Patients Covered entities are: DSH hospitals, freestanding cancer hospitals and children s hospitals with disproportionate share adjustment percentage > 11.75% Sole community hospitals/rural referral centers with disproportionate share adjustment percentage > 8% Critical access hospitals FQHCs and FQHC look-alikes Family planning projects funded under Section 1001 of the Public Health Service Act Ryan White clinics State AIDS drug assistance programs Black lung clinics Hemophilia treatment centers Native Hawaiian health centers and urban Indian organizations Federally funded STD and tuberculosis clinics Patients of a covered entity must meet three requirements to be eligible for 340B drugs: Covered entity maintains records of individual s healthcare Clinician providing services to individual is employee of covered entity, or provides healthcare under another arrangement so that responsibility for care remains with covered entity Other than for hospitals, services must be consistent with the services for which the covered entity receives the grant funding that qualifies it for covered entity status Individual does not qualify as a patient of a covered entity for 340B purposes if the only healthcare services the individual receives from the covered entity is the dispensing of drugs for subsequent self-administration or administration in the home setting

18 340B Program Overview (cont.) B drugs may be dispensed through both in-house and contract pharmacies, but are subject to certain restrictions Role of Pharmacies In House Pharmacies A covered entity may dispense 340B drugs through in-house pharmacies, if it has in-house pharmacies Contract Pharmacies: In addition to dispensing 340B drugs through in-house pharmacies, a covered entity may enter into contract pharmacy arrangements with outside pharmacies GPO Exclusion GPO Exclusion DSH hospitals, children s hospitals and cancer hospitals that participate in 340B program may not purchase covered outpatient drugs i.e., drugs covered by 340B program through a GPO. Prohibition on Duplicate Discounts Prohibition on Duplicate Discounts: A drug may not be subject to both a 340B discount and a Medicaid rebate If covered entity uses 340B drugs for Medicaid patients, Medicaid program must be able to identify and exclude such drugs from rebate requests 2016 OIG report found most Medicaid programs use provider-level methods to identify and exclude 340B drugs from rebate stream; recommended use of claims-level methods instead Drugs dispensed to MCO patients create particular challenges

19 340B: Impact of the Affordable Care Act (ACA) 19 Expanded covered entities to include qualifying children s hospitals, critical access hospitals, free standing cancer hospitals, sole community hospitals, and rural referral centers. Exempted orphan drugs from the 340B definition of a covered outpatient drug making them ineligible for 340B discounts Mandated that drugs provided by Medicaid MCOs be included in Medicaid rebate requests, meaning that state Medicaid programs must: Track drugs provided through Medicaid MCOs Where such drugs are 340B drugs, ensure those drugs are not included in Medicaid rebate requests

20 340B: Current Issues 20 Reductions in Medicare Part B Reimbursement Hospital Outpatient Prospective Payment System Final Rule released 11/1/17: Effective as of 1/1/18 Reduces Medicare Part B reimbursement for 340B drugs from ASP plus 6% to ASP minus 22.5% (excluding pass-through drugs and vaccines). Children s hospitals, free-standing cancer hospitals and sole community hospitals are exempted from the reductions Provides that CMS will establish two modifiers for hospitals to use to identify whether a drug billed under the OPPS was purchased under the 340B program Other Regulations in Development Civil Monetary Penalties Rule: Final Rule published 1/5/17 Will impose civil monetary penalties on pharmaceutical manufacturers that intentionally overcharge covered entities for 340B drugs. Effective 10/1/17. Administrative Dispute Resolution Rule: Proposed Rule published 8/12/16 Would establish administrative dispute resolution process to resolve claims by covered entities that have been overcharged for 340B drugs. Not yet finalized.

21 340B: Current Issues (cont.) B program has been caught up in debate about prescription drug prices - policymakers have renewed focus on the program, particularly for DSH hospitals: June 2017: Leaked executive order from Trump administration suggested 340B Program would start to tie volume of discounted drugs to indigent patient volume. October 2017: House Oversight and Investigations Subcommittee held hearing titled, Examining How Covered Entities Utilize the 340B Drug Pricing Program. November 2017: Medicare Part B reimbursement for 340B drugs for most hospitals reduced to ASP minus 22.5% Scrutiny of 340B program is not new for example: September 2011: GAO report called for increased government oversight over the 340B program July 2012: House Ways and Means Health Subcommittee members urged HRSA to issue an updated definition of a patient to limit the program s eligibility for those truly in need and curb any misuse of the program March 2013: Senator Grassley asked HRSA to collect data on how the revenue covered entities receive through the 340B program, and how they use such revenue.

22 340B: Prior concerns led to efforts at reform 22 Omnibus Guidance Guidance published in August 2015 would have addressed a broad range of topics, including definition of patient for 340B purposes. Withdrawn by current administration on 1/30/17; next steps unclear. HRSA Covered Entity Audits HRSA began auditing covered entities in 2012, conducting over 600 audits; nearly 60% were of DSH hospitals. Common audit findings include: 1) Having incorrect primary contact, 2) Providing 340B drugs to inpatients and 3) Failing to maintain auditable records. Corrective actions typically involve entity repaying drug manufacturer all the savings and correcting information in HRSA database.

23 Looking Ahead 23 Continued focus on pharmaceutical pricing likely to result in continued focus on 340B Program Medicare Part B reimbursement reduction for 340B drugs to ASP minus 22.5% finalized in recent Medicare HOPPS final rule Potential changes to patient definition remain in flux; unclear what next steps will be particularly given Trump administration restrictions on issuance of additional regulations Efforts to repeal ACA could impact 340B provisions implemented by the ACA, such as inclusion of additional covered entities and requirement that state Medicaid programs seek rebates on drugs dispensed to Medicaid MCO patients Any legislative action will draw strong reactions from powerful pharmaceutical company and hospital lobbying organizations 23

24 Megatrends for Payers 24

25 Do Value Based Payment Models Encourage The Use of Innovative Products? 25

26 Administration Support of Value-Based Payment Models With Changes to Quality Measures 26 The move to value is still a strong priority at CMS. It s not a partisan issue. Kate Goodrich, M.D., Director and CMS Chief Medical Officer, National Quality Forum Annual Conference. April 4-5,2017 We are revising current quality measures across all programs to ensure that measures are streamlined, outcomes-based, and meaningful to doctors and patients. Meaningful Measures takes a new approach to quality measures to reduce the burden of reporting on all providers. Seema Verma. Administrator CMS. Health Care Payment Learning and Action Network Fall Summit, October 30, 2017 We will continue to explore methods to add Part D drug costs into cost measures in the future. CMS. Quality Payment Program Final Rule. and Part B Drug Fact Sheet (November 2017) Merit-based incentive payment adjustments apply to Part B drugs when the cost of the drug itself and administration of the drug are directly attributed to an eligible clinician.

27 Value-Based Payment Model Categories Recognize Consolidation of Market Players 27 Reliant on Fee-for-Service Architecture: Generally tied to existing codes, coverage, and payment policies unless specifically waived Population-based payment: More flexibility Refreshed Alternative Payment Model (APM) Framework A payment model classification system originally developed by CMS and refined by the Health Care Payment Learning Action Network. New: Integrated Finance & Delivery System Alternative Payment Models (APM) Framework: Refreshed for July 10, 2017.

28 Attendee Polling Question In which of the more advanced value-based payment model categories are you currently exploring potential arrangements? (choose any that apply) A. Category 3: Advanced Payment Models Built on Feefor Service Architecture B. Category 4: Population-Based Models (e.g., PMPM, global budgets) C. None of the above

29 Do Alternative Value-Based Payment Models (VBP) Encourage Use of Innovative Medications? 29 1 What are the dominant reimbursement methods for Product X within valuebased payment (VBP) models? Are there bonuses/losses tied to the Product X? 2 FFS, capitation with and without carve out, shared savings/losses, Which VBP models include quality measures relevant for Product X? 3 What are the statutes/regulations that guide coverage and patient costsharing for Product X that the value-payment payment models must comply with? 4 Do VBP models include provider and patient education on use of Product X?

30 Product X Radar Mapping - Example What VBP Design Features Incentivize Use of Product X? 30 MOST FAVORABLE VBP Better Financial Incentives VPB Financial Incentives that Create Reimbursement Incentives Sufficient to Cover Costs of Product X o Best: Fee-for-Service plus Incentives o Baseline: Fee-for-Service or Capitation with Product X Carve- Out o Worst: Capitation w/product X Carve-In LEAST FAVORABLE VBP More Favorable Performance Incentives Performance Incentives that Rely on Performance Scores that Prioritize Measures Related to Product X o More complete set of measures related to Product X o Performance scores that weigh measures related to Product X more heavily o Performance scores that are tied more directly to financial incentives

31 Value-Based Payment Models on the Product X Radar 31 Value-based payment models vary widely on how strongly they incentivize Product X Better Financial Incentives * FFS + incentives FFS or Capitation w/carve out Capitation (no carve out) CPC+ Part D MACRA/MIPS Medicaid (FFS): MN Medicaid (ACO/MCO): MN MSSP (1,2,3), Next Gen FFS Medicaid (FFS): OR, CO Medicaid (ACO/FFS): MN, CO Next Gen (all inclusive PMPM) Commercial Type 5: ACO fully capitated; multi-measure performance incentive Medicaid (FFS): NY, TX Medicaid (CCO): OR Commercial Type 1: Network providers FFS w/incentives tied to Product X use rates Commercial Type 2: ACO based on FFS; multi-measure performance incentive Medicaid (MCO): NY, TX, CO, MN MOST FAVORABLE Commercial Type 3: ACO capitated; high cost Product X carve out; multimeasure performance incentive Commercial Type 4: PCMH fully capitated w/incentives tied to Product X use rates LEAST FAVORABLE Product X measures less prioritized in VBP approach Product X measures more prioritized in VBP approach More Favorable Performance Incentives * MCO: Managed Care Organizations; CCO: Coordinated Care Organization

32 Looking Ahead 32 Move towards more integrated, risk-based and value-based payment and delivery will not change Understand which value-based payment models and to what extent these models encourage use of medical innovations generally, and which type of medical innovations are encouraged Continue to shape environment for value-based arrangements, including provisions to protect access to medical innovations Engage in development and encourage the inclusion of performance measures to address the Value of Product X, with more attention to outcomes, population health measures and resource use measures Engage providers who are often confused about VBP and impact of the use of Product X 32

33 What Is The Potential Impact of CMMI RFI? 33

34 CMMI is the Medicare and Medicaid R&D Lab 34 The Center for Medicare and Medicaid Innovation (CMMI) is an independent office at CMS that experiments to increase quality and reduce costs in Medicare, Medicaid and CHIP Created under the Affordable Care Act Budget of $10 billion for every 10 years Can waive Medicare, CHIP and some Medicaid requirements The CMMI Model Life Cycle Testing: CMMI runs small-scale pilot programs Evaluation: Pilots effect on cost and quality measured through independent analysis Expansion: Programs made permanent if they improve quality or decrease cost

35 Recent RFI Announces New Direction for CMMI 35 This administration plans to lead the Innovation Center in a new direction. We are issuing a request for information to collect ideas on the path forward. - CMS Administrator Seema Verma RFI Announces guiding principles for new model tests (and rethinking of old ones) under current leadership. Advertises priorities and hints at specific new model tests. Priorities can change HHS Secretary & CMMI Director positions vacant. Seeks comments and ideas for tests by November 20, 2017: innovation.cms.gov/initiatives/direction Response is chance to suggest specific policies, influence direction of CMMI, and position responder as partner for innovation with CMS

36 CMMI RFI Proposes Overarching Principles for New Model Tests 36 These principles reflect administration s priorities and its critique of past CMMI activities. They are not specific to any particular model test. Choice and competition in the market 1 Provider choice and incentives (esp. voluntary tests) 2 Patient-centered care 3 Benefit design and price transparency 4 Transparent model design and evaluation 5 Small-scale testing 6 CMMI will promote these general themes across all new models

37 CMMI Highlights Drug Models in RFI 37 Quotes from RFI test new models for prescription drug payment, in Medicare Part B and Part D and State Medicaid programs Align incentives and engage beneficiaries as consumers of their care Novel arrangements between plans, manufacturers, and stakeholders including value based purchasing increase drug pricing competition while protecting beneficiaries access to drugs. their potential meaning Need solutions to reduce drug costs in Medicare and Medicaid Considering consumer cost sharing/incentives as lever Want to encourage value-based purchasing Considering formulary flexibility in exchange for cost reduction, but need mechanisms to protect beneficiaries

38 CMS Will Focus on Prescription Drugs Using All Available Tools 38 CMMI has limited waiver tools on prescription drug costs, as it lacks authority to waive the Medicaid best price rule, frequently cited as a barrier to value-based contracting. Expect CMS to use other tools to promote value-based contracting. Example: The Kymriah Deal Novartis announces agreement with CMS for gene therapy focused on improving efficiencies in current regulatory requirements to permit indication-based pricing. CMS does not confirm, but states it is continuing to explore the development of payment models and arrangements for new and potentially life-saving treatments. Arrangement may be that CMS will provide separate J codes/hcpcs codes for each Kymriah indication. CMS promises to issue future guidance to explain how pharmaceutical manufacturers can engage in innovative payment arrangements. The future guidance may shed light on how to report prices of drugs in valuebased arrangements so as to not trigger best-price obligations.

39 Looking Ahead 39 CMMI will survive in new administration, but direction still in flux Request for Information reveals CMMI s interest in reducing prescription drug costs: Potential willingness to experiment with consumer incentives, value-based purchasing and formulary flexibility Expect prescription drug activity across CMS, not just from CMMI CMS guidance on value-based contracting, if/when released, will shed light on agency priorities and methods in prescription drug contracting

40 Attendee Polling Question Which of the megatrends discussed do you believe will most impact your organization in the next three years? A. Direct-to-patient innovation B. 340B changes C. Value-based payment D. CMMI demonstrations

41 Manatt Panel Roundtable 41

42 Questions and Discussion 42

43 Thank you from the Manatt Team 43 Sandy W. Robinson, Managing Director Helen Pfister, Partner Annemarie Wouters, Senior Advisor Adam Finkelstein, Counsel